Wipro and HCL Tech, two of the country’s biggest IT firms, have deferred salary hikes for their employees from the second to the third quarter. In fact, HCL Tech has said that it will skip salary hikes for senior employees this financial year.
Usually, IT firms like Wipro and HCL Tech give salary hikes during the second quarter of the fiscal.
Infosys gives hikes during the first quarter (June), but has not done so till the current month. It has not communicated anything to the employees on this front so far. The company will be announcing its April-June earnings on July 20.
The deferral of salary hikes comes at a time when IT companies are looking to protect their margins by controlling the wage bill.
“We did our last salary increase in September of last year, and we plan to do that for this year sometime in the third quarter,” Jatin Dalal, CFO, Wipro, said in the post-earning call with analysts. He added that the impact was not being factored in for the second quarter.
Wipro will, however, pay 80% of the variable pay for Q1, which applies to junior level employees, whose payout is linked to the company’s performance. For those at the manager level and above, the variable payout will be as per the performance of the business unit they are part of.
“This year, we have made a decision to skip the compensation review, starting with the management layer, which is E4+, and also defer for junior- to mid-level people by a quarter, which is E3 and below levels,” C Vijayakumar, CEO and MD, HCL Tech, said during the analyst call.
HCL Tech CFO Prateek Aggarwal said that the E4+ layer, which includes the senior most staff, forms a significant portion of the company’s wage bill.
On Thursday, Wipro reported a revenue decline of 2.8% quarter-on-quarter in constant currency in IT services business during the April-June period, due to adverse macro and a slowdown in discretionary spends in key verticals like banking and financial services, and consumer and hi-tech. “Despite healthy deal wins, the softness is expected to continue in Q2, as the company has guided for A revenue performance of -2% to +1% CC in Q2FY24. Given Wipro’s broader presence in the discretionary areas, the conversion is a challenge as enterprises are cautious and are reprioritising spends,” Motilal Oswal said in its report. It added that amid macro uncertainties, the management is confident of maintaining the margin in Q2 by deferring the wage hike cycle to Q3.
“Based on the recently-announced results of Accenture, TCS, HCL Tech and Wipro, and from demand commentary, it is evident that the companies aren’t seeing any immediate demand revival in Q2FY24 and that visibility of recovery in H2FY24, too, is limited at this stage,” ICICI Securities said.
HCL Tech, which announced its results on Wednesday, reported big misses on several counts against analyst estimates. One of the key metric missed was the Ebit margin, which fell to 16.9% during the quarter, down from 18.2% in the preceding quarter. The company said that nearly 36 bps of fall in the margins were driven by lower utilisation rates during the quarter.